Study find no change in racial discrimination in hiring for past 25 years!

Sad but True. Hiring Discrimination has not Changed Since 1989

A study published in the Proceedings of the National Academy of Sciences found that discrimination in hiring has not changed for Blacks since 1989. There was a slight decrease for Latinos during the same time period.

The four researchers looked at every hiring discrimination study since 1972. They chose to focus on the period 1989 to 2015 when better studies became available. They gathered up all the data from each of the individual studies to build a larger, "meta" data set.  The data contained about 56,000 applications for 26,000 positions in total. The studies took into account education, gender, and local labor market conditions.

Based on the studies, Whites receive about 36% more call backs than Blacks and 24% more callbacks than Latinos. The results have not changed in 25 years.

The study was published in the Proceedings of the National Academy of Sciences. Here is a link tothe  PNAS study on hiring discrimination. And the abstract. The paper looks at an assembled data set from multiple hiring discrimination studies.

It's sad to say: We have made NO progress on hiring discrimination in 25 years.

It is also interesting to note that during approximately the same period, 1980 to 2017, wages for the majority of workers have been flat. So, with more workers fighting over fewer good jobs there is no  incentive to reduce hiring discrimination.

EBE Note #2: You have to hand it to the National Academy of Sciences for solid, large scale, impactful research.  They tackled immigration and pretty much settled the debate about the true cost of immigration to US soceity.  Now the produce a great and sad study about hiring discrimination.

Top Black Business and Black Economic Stories for the Month of October, 2017

Top Stories

Mented Cosmetics Raises Capital

Forbes report that Mented, a Cosmetics company, raised more than $1 million in venture capital financing.  Mented, which is short for pigmented and was found by two black women who met at Harvard business school.

Colin Kaepernick sues the NFL for collusion

Sport Illustrated has a story on how Kaepernick’s Collusion claim will be difficult to prove

The Colin Kaepernick foundation has almost reached his pledge to donate $1 million dollars to charity.  The money comes from his 2016 season salary plus football jersey sales.

Kaepernick also honored by the NFL players union for his charity work

New data show African American Student loan crisis. 
This story shows Blacks are more likely to have large student loan debt.  Also for profit colleges targeted African Americans contributing to the student debt crisis. 

Employment Discrimination and Harassment

Lupita N’Yongo accuses Hearvy Weinstein of harassment

Kansas City Firefighter wins discrimination claims for $356K

Bedford-Stuyvesant fire captain under investigation for speech to Black students about fire department salaries and myths.

Square and Pinterest revel employment data by race and gender

Personnel Moves

Ken Chenault, prominent Black CEO of American Express, to step down after 17 years.

Rosalind Brewer promoted to Chief Operating Office of Starbucks

Universal Basic Income

Stockton, Ca to become largest guaranteed income experiment

Stockton has a Black mayor

Cities and Urban Affairs

Black Residents in DC left behind economically according to Georgetown study

Black Celebrity Business News

Floyd Mayweather delinquent on state unemployment taxes

Main Steam Economics

President Trump and the Republicans propose tax cut for corporations and the rich

GOP Tax Plan from the Washington Post

The Whitehouse Council of Economic Advisers tax study uses poor economic reasoning

Council of Economic Advisers Study on Tax Cuts and Wages

The Council of Economic Advisers study supports cutting the official corporate tax rate from 35% to 20%. The CEA says that the effort will boost middle class wages. Here are some initial problems with the study

There is a huge assumption that corporations would use the extra money from tax reduction to fund wages and investments rather than pay dividend to the rich. There are lots of reasons to doubt those assumptions

1) Corporations already have a record amount of cash holdings that they are not investing nor using for wages.  Reports say corporations are sitting on nearly $2 Trillion in cash.
2) There is no pressure to raise wages in the current globalized environment.

3) Most corporations don’t pay that actual 35% tax rate. Instead they pay an effective tax rate for about 18% on average.

4) Other countries would respond to our tax rate change, creating a race to the bottom. The only winner would be corporations. Ireland has been ripping of the EU for years with "shell" corporations.

5) And finally, there is no proven link between corporate tax rates and wages. Yikes.

Also, the study says the average tax payer would reap a $4000-$9000 dollar benefit.  So with 315 million people that

The figures are pure speculation.  Any realistic economic model would be too complex to making a prediction with any kind of accuracy.  Instead, a real model would produce an average number (say $6000) and a upper for lower range(like -$10,000 to $20,000). That's a range of $30,000 and some people would be losers under the plan.

The CEA is just producing economic cover for a tax proposal that benefits the rich. 

Forbes reviews the CEA study

Richard Thaler wins nobel prize in economics. Dr. Thaler won for work in behaviorial economics.

We are more Homer than Spock. An interesting look at behavior economics.

Interesting / Other

Seville row tailor, Andrew Ramropp OBE, won British BlackBusinessman of the Year.

State Budget Issues Make Headlines

There are some good articles out there on state budget issues. We are looking at articles on budget issues in key states like Illinois, Connecticut, Texas, California and New Jersey.

State budgets are in a trouble because pension, healthcare and education budgets have continued to increase while state income tax revenues(and average state incomes) have not grown above inflation. Only the top 1-2% of income earners have seen growth. State legislators are afraid to taxes the super rich because they don't want the label of "raising taxes." The rich, who generate an lot of passive income from investments, may simply move elsewhere. State governments are caught in a grip of powerful civil service employees want pension benefits, corporations who want tax breaks and the public wants safety and aid for education.

To take a closer look, we reviewed state finances at State Credit Ratings. Some states have great ratings, but for what purpose? The don't borrow or invest much money in their own state so why keep a good credit rating. The states fall into two groups: states with low debts and pension obligations because they historically have not done much for their citizens (south, conservative west and conservative mid-west) and and states that deliver high government benefits (like education) and have good credit ratings. Minnesota seem be the best managed of the states, but Massachusetts is also up there.

Overall, it looks like tough times in northeast and liberal Midwest as growth slows. Both areas may have over promised pensions to civil servants and teachers.

In all jurisdictions (except CA and MA) there is huge pressure from White voters not to raise taxes(tea party) as a code for not helping the poor and minorities. Most articles also indicate that the top 1% (2%-5%) of income earners has done very well. 

Connecticut

NYT: Wall Street Retreats in Connecticut

Slate: Corporations leave Connecticut

The Atlantic: Connecticut Inequality Vol 2

The Atlantic: Connecticut Inequality Vol. 1
This is really good story which details why employment in the finance industry does not create middle class jobs

State of Connecticut tax study

Illinois

Illinois passed it first budget in two years and voted to increase income taxes and sales taxes

Illinois has highest Black unemployment rate  

CNN: Illinois signs budget deal

Where Illinois Fiscal crisis came from <= pretty good

Texas

Tesas passes budget

New Jersey

New Jersey Passes Budget thanks to Chris Christie's beach antics.

California

No news in california. The state added money for education and refinanced public pensions.

Jerry Brown signs $125 billion dollar budget

The good news

There is some good news that we frequently forget: California, New Jersey and Connecticut are among the best states for quality of life and education. For example: Where I live in New Jersey, almost all of the schools are above the national average in achievement.

Black Business and Economics Stories for Month of June, 2017

There are few Black Business stories in the main steam media this month

The chaos causing Trump presidency has sucked all the news-oxygen out of the room.  He makes the lazy news media's job very easy. An very profitable. And he makes the deep, complicated real-life media's jobs irrelevant. The media and Trump are making us dumber all the time. But which came first the dinosaur or the egg?

Me, Me, Me

So (me) how (me) does (it's all about me) this (me) affect me ? Basically there is no Black Business news coverage any more. It's like unions, education, pensions, and the homeless. If we don't cover it, maybe the problem will go away.

Some of this is our own fault.  We need to do more original material rather than stealing the work of others. We need to do more long form stories and detailed research projects. So, to fund this new, expanded coverage, we are actively pooling our resources and investing in: Lottery Tickets.

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Anyway, here are some of the top Black Business and Economics stories for the month

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Johnson Publishing Company, which publishes Ebony and Jet, is closing shop in Chicago. It was sold to an investment company in Texas. JPC recently relocated its staff to Los Angeles.

Crain's Chicago has the story

Desiree Rodgers bailed out in May

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CNN covers the Black vs. White wealth gap. Same story; new day. (note: Watch out the CNN website is a gigantic ad-pump with very little in depth content.)

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MarketWatch looks at Mellennials. Why black and Latino millennials are struggling more than their white peers.

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Chicago Defender has an update on the Black Bank surge at Citizens Trust Bank in Atlanta

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The Root does an interesting analysis of police killings and payouts.  It's called "How much is a Black life worth? We calculate it."

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We have started watching "Cleveland Hustles" with Bonin Bough on CNBC
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The national urban league released the State of Black America 2017 report on May 2017. The report shows a slight overall improvement in many of the indexes. Thanks Obama.

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The Federal Reserve Bank of Atlanta named Raphael Bostic as a regional governor. Apologies if this was posted before even though it is a big deal

Unemployment stable in May 2017. More than 600,000 people left labor force.

The labor economy in the US is unchanged in May 2017. It has been stable within a narrow band for the past two years. The national unemployment rate dropped to 4.3%. Wages grew by only 4 cents. The number of unemployed was 6.9 millon down 200k from last month and the number of long-term unemployed was recorded at 1.6 million (up 37K from last month). 

However, the unemployment rate dropped for a bad reason: A record 608,000 people left the labor force. Different racial groups left the labor market at different rates: 534,000 Whites left the labor force while only 67,000 Blacks and 82,000 Hispanic/Latinos left.  And 21,000 Asians joined. Of the 608K that left 367,000 were men and 241,000 were women. 

There were gains in healthcare, business services and food services. Employment revisions were down -66K for the prior two months. Hours worked were the same.

  

Since May 2015, the national unemployment rate has dropped about one percentage point (from 5.5% to 4.3%).  Blacks have made the largest gain during the period as the Black unemployment fell from 10.2% in May 2015 to 7.5% in May 2017.

The Big Story(s)

The big story is the smooth running of the economy. Thanks to Obama,Yellen and a host of others, plus the natural gas boom, the economy is in great shape. Unemployment is low. Wage inflation is low. We are are in a long-term growth pattern with a rate of about 2% growth for the next 2-3 years.

The second big story is the lack of wage pressure in the economy. Lack of wage growth fuels inequality in our society.  We see no sign of "full employment."

Missing wage inflation is linked to two trends: hidden unemployment and decreased worker bargaining power. Lack of power has led to workers expectations being "whipped" by corporations. Labor has stopped asking for higher wages and feels lucky to have a job (healthcare is a bonus). Employers think the same way and do not feel an pressure to compete for workers based on wages.

The recession of 2007 finalized a huge, on-going reset in employer and employee relations.  We are seeing the end result. 

The third big story is how well the country runs with little guidance. Its true; we have many large, long-term problems that are being ignored. Since the economy running great, we can afford to do so. Large problems such as poverty, jobs, wages, inequality, a shrinking middle class, entitlement costs and healthcare costs can be pushed further down the road.

Finally, the other big story, of course, is the ongoing chaos in Washington. The confusion of the past six months has yielded little action.   We are a progressive blog. We think nothing good can come from the Trump administration however we are getting used to him. We are worried they will get their act together and do some real damage to progressive causes. Thank goodness our economy and our system of government are mostly self correcting. 

The Black Unemployment Rate

The Black unemployment rate dropped to 7.5% from 8.6% last month as 46,000 more people reported to work. The unemployment rate for Black men, 20 and order, was 6.5% while Black women in the same age group were unemployed at a rate of 7.0%.  Black men participate in the labor market at a 68% rate while the participation rate for Black women is 63%. Black teenage unemployment was calculated at 27%. 

The chart below shows the Black unemployment rate and the LFP rate but smoothed out by using a 4 month moving average. 

As is our custom, we calculate the real Black unemployment rate. It was determined to be 11.6% in May. Both the Black unemployment rate and the US U-6 rate declined during the period.   U-6 is the broadest measure of unemployment. U-6 is basically anyone who wants to work and has looked for a job in the past 12 months plus part time people who want full time work.

Business Establishment Payroll Changes

Again, Non Farm Payrolls added 138,000 workers in May 2017. Government employment saw a slight reduction.

There usual categories led the job growth: business services, healthcare and hospitality. A lot of important categories were down.  Construction added 11,000 jobs. 

Just a reminder that the United States is a service economy.    Only 19% of new jobs produce goods (15% if you include government as a service).

Hourly wages for all employees increased by by $0.04 cent in May to $26.22.  Hourly wages are up about 2.5% (1.2% when adjusted for inflation) in the past year. Hourly wages for non-supervisory employees rose by 3 Cents.

The average growth in wages has been below 1% after inflation between 2006 to 2016.

March NFP jobs were revised down from 79K to 50K (-29K). April was revised downward from 211,000 to 174,000 (-37,000). 

ADP reported 253,000 non farm payroll jobs were created.  The jobs were split among small businesses (+83K), medium sized businesses (+113K) and large businesses (+57K).  According to ADP goods producing business increased jobs by +48K while services hired 205K workers. Manufacturing lost 8K jobs.

Paychex small business jobs index was flat at 100.34; a completely neutral value. It's down -0.25% for the year.

Seattle Minimum Wage Study shows net loss of income for low wage workers as hours are cut

Researchers at the University of Washington have released a detailed study of the second round of Seattle minimum wage hikes. They determined that the second hike from $11.00 to $13.00 dollars may have led to employers cutting back on employees hours. Washington State is one of four states to collect data on employment hours as well as employment levels.  The detailed data is required for this type of study.  

Overall, the study found a net loss of income for low wage workers. The workers lost earnings because they worked less hours but at higher pay. The first hike is had no effect on employment levels in Seattle.  

Here is the link to the study...

University of Washington Seattle Minimum Wage Study at the National Bureau of Economic Research. If google the title "MINIMUM WAGE INCREASES, WAGES, AND LOW-WAGE EMPLOYMENT: EVIDENCE FROM SEATTLE" you can find a PDF version.

The study found that for Seattle restaurant workers, the recent increase in the local minimum wage from $11.00 to $13.00 reduced hours by 9% and increased wages by 3%. The result was a net loss of $125 dollars per month for low skilled restaurant workers. However, the number of restaurant employees remained stable. 

This was especially interesting because it used state wage hour study appears to be quite good compared to past minimum wage vs. employment studies.  However, overall unemployment was stable.  

However, there are some problems with the study.

1) They used stand alone restaurants only. They excluded multi-location chain restaurants. 

2) About 70 percent of workers in Seattle already make $13.00 and hour or more.  The study shows an employment increase in workers making above $19.00. 

3) The study was limited to Seattle. Seattle is a boom town with few comparable cities. Separating out the "Seattle" effect (great economy, lots of rich people) from the minimum wage effect may be close to impossible. Seattle has a 3.2 % unemployment rate. 

Interestingly, the study may have "accidentally" determined is the equilibrium or trade off point between employment and wages for Seattle for low wage restaurant workers. We have to wait for the results from other jurisdictions that have raised the minimum wage. The results also support minimum wage increases in jurisdictions below the equilibrium. Workers and governments are leaving money on the table. 

Researchers also found that employers shifted to more experienced workers. Many first time workers may find their first job opportunity will decrease. We will have to wait and see the results of the next increase.

Since, the study is so important, there are lots of articles on the topic. 

Washington Post

https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-study-casts-doubt-on-whether-a-15-minimum-wage-really-helps-workers/

538

https://fivethirtyeight.com/features/seattles-minimum-wage-hike-may-have-gone-too-far/

Here are some over the top headlines

Study: Seattle's minimum wage increase goes horribly wrong

http://www.washingtonexaminer.com/study-seattles-minimum-wage-increase-goes-horribly-wrong/article/2627071

The Center for Wage and Employment Dynamics found no such reduction on jobs in the Seattle restaurant industry. Berkley's Institute for Research on Labor and Employment has a traditional study on the same period using US census data.

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Notes:

The Federal government is cutting the funding for the US Census including expanded data collection on the labor market.

Lastly, We would like to add that the US is the only western democracy where there is a active and vociferous debate about increasing the minimum wage. The UK, France and Germany have all created, where it did not exist, or increased the current minimum wage with much less rancor and debate. In addition, most countries invest in Active Labor Market policies to help the unemployed re-enter the labor market and to help low-wage workers find better paying jobs. 

We are completely confused about the popular demand in the US that people work but our unwillingness to pay them a fair wage.  

"Stop sports Arenas Subsidies" bill introduced by Booker (D-NJ) and Langford(R-OK) in Senate

Two Senators have introduced legislation to stop federal government subsidies from support sports arenas. 

Two senators, Corey Booker, D-NJ and Frank Langford, R-OK want to stop sports team giveaways.They have introduced Senate Bill SB. 1342

Wealthy team owners don’t need federal tax breaks to build new stadiums, U.S. Senator Cory Booker said in support of the measure.

ESPN had the original, breaking coverage.

Here is the Brookings Report covering the waste of taxpayer subsidies going to billionaires.  

Another article from Vice Sports has lots of links on the issue.

To show how hard it is to get rid of these subsidies. Check out this story on Sen. Moynihan, who introduced legislation in 1996 to stop similar subsidies. The bill was S.1880.

And NPR in 2011 also had a good summary of the issues.

Some programs at the University of Phoenix have a 11% job placement rate for $60K tuition

The University of Phoenix looks like a scam

We were recently reviewing entrepreneurship programs at colleges in the US. We came across a program at the University of Phoenix which grants a Bachelor of Science in Business with a concentration in small business and entrepreneurship.  The program costs almost $60,000 and has an 11% job placement rate.

Gainful employment statement.
Another link.


The Gainful Employment Statement is the result rules created by the Obama administration in 2015 because of low performing for-profit schools.

LeBron-O-nomics

The value of LeBron to the city of Cleveland is making head line news.  The owner of Quicken Arena in downtown Cleveland has asked for a $180 subsidy from the city and county to renovate the area. We want to look more closely at the economic impact Lebron and the Q Arena have on the city of Cleveland.

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Cleveland.Com discusses the value of LeBron's return in 2015.  The estimate was $500 million in the story. However, the article covers reason why that figure might not be reliable. Basically, very little new revenue is generated in northeast Ohio from outside the region, instead the money simply flows from other spending in the region like movies and restaurants. (Hey, I am going to skip Starbucks this week to see LeBron).

An older article from 2010 tracks the details of "How much is LeBron worth to northeast Ohio?" They breakdown LeBron value to the local businesses, City, Region and the Cavaliers.

The authors also call LeBron "priceless" in the story. The statement captures how difficult it is for a city to strike a fair deal with owners regarding arenas and superstars.  There is always an implied threat they will move away. And you can't negotiate with a monopoly.

We do want to note: There is some value in bringing together a diverse set of fans including those from the suburbs to downtown Cleveland. Also, LeBron and the Cavaliers enhance the image of the city of Cleveland nationally and internationally.

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A new paper from American Enterprise Institute economists attempts to quantify the effect.
The paper called "Taking My Talents to South Beach (and Back)" looks at the natural experiment of LeBron James leaving Cleveland in 2010, moving to Miami (winning two championships) and then returning to Cleveland in 2014.

The researchers found that LeBron James increased the number of restaurants and bars by about 13% and employment by 24% in the local area.  The effect is most notable with in a one mile radius of the arena. There is was no effect past seven mile away

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In related but separate news, one of the key papers in the sports subsidy field, "Do Economists Reach a Conclusion on Subsidiesfor Sports Franchises, Stadiums, and Mega-Events?" by Dennis Coates and Brad R. Humphreys, summarizes the opinions of economists related to supports subsidies.

Here is another link.

A majority of economists surveyed at the American Economics Association convention find no benefit to sports subsidies.  There is no market failure requiring a subsidies, instead the subsidies enrich monopoly owners. Basically subsidies are a waste of money and team owners are playing off cities against each other.

Here is a great quote from the paper...

"We have seen that economists in general, as represented by Whaples’s survey (2006), oppose sports subsidies. Economists reach the nearly unanimous conclusion that “tangible” economic benefits generated by professional sports facilities and franchises are very small; clearly far smaller than stadium advocates suggest and smaller than the size of the subsidies. The fact that sports subsidies continue to be granted, despite the overwhelming preponderance of evidence that no tangible economic benefits are generated by these heavily subsidized professional sports facilities, remains a puzzle."

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Brookings Institute has the often quoted article from 1997, Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost? by Noll and Zimbalist which discusses tactics cities can fight back against sports subsidies. Not a lot can be done but have active citizens and politicians can force monopoly sports owners to cut a better deal.

FANG and Google content sites

When we got up this morning, we did the usual.  We handled out business(we made coffee, people!) and used Google search to see what was going on. Google had a small ad at the bottom of the screen promoting an internal web site. Google sites are known to have some great content, so we clicked and got:

Italy -- https://www.google.com/culturalinstitute/beta/project/the-grand-tour-of-italy

Fashion -- https://www.google.com/culturalinstitute/beta/project/fashion

The sites are loaded with images and discussions. Lots of details and suggestions for further research. Just great, engaging material.

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Then we thought about it for second.  FANG - Facebook, Amazon, NetFlix and Google - earn most of their profits from the content, creation, and products of others. The create almost zero, original content. Google let's you find other peoples web pages and watch youtube videos. Netflix lets you watch movies created by others. Amazon sell other peoples stuff. And Facebook, the worst of all, is 100% user created. FB has nothing original.  

To be fair, Amazon has opened distribution centers and Netflix has created some original content. 

What these companies have in common is that they are "natural" monopolies created by the internet.  They distribute the hard work of others for a fee, while making enormous profits.

Some of our richest and most successful companies, effectively "steal" content from people and then charge for accessing that content.  This hustle sends society the wrong message about how to be successful. People are no longer interested in putting in the hard work.  Instead, they are looking for a "get-rich quick" scheme like Facebook where they can skim off a little from the top.  That's the message these big companies are sending. 

We seem to be rewarding the wrong people in this process. We have created a business culture where there is little long-term innovation, rather everyone is looking for a quick payday. 

We have to find a way to reward our real innovators and our artists rather than IT people who move electrons around.